The company's 2016 performance is expected to grow by 50%-80%. The company's funds bid for Kumho Tire to lay out global development. The majority of controlling shareholders' participation increased, demonstrating confidence in development. We expect the company's 2016-2018 EPS to be 0.15, 0.25, and 0.34 yuan respectively, and corresponding PE to be 53X, 32X, and 24X respectively, maintaining the “highly recommended” rating. Event: The company released its 2016 performance forecast. The company expects net profit attributable to shareholders of listed companies in 2016 to be 91.8971 million yuan to 110.2765 million yuan, an increase of 50%-80% over the previous year; basic earnings per share of about 0.14 yuan to 0.16 yuan. The company announced that its participating industrial merger and acquisition fund plans to bid for 42.01% of Korea's Kumho Tire shares. Demand in the tire industry is improving, and the company's transformation and upgrading are driving the company's performance growth: In 2016, domestic automobile production increased 14.46% year on year, and the growth rate reached a new high in the past three years. The increase in automobile production led to an increase in tire demand. In the first 11 months of last year, domestic rubber tire outer tire production increased 7.6% year on year. Tire export demand is relatively good. In the first 11 months of last year, domestic exports of pneumatic rubber tires increased 5.9% year on year. In 2016, the company accelerated the IoT strategy of “three circles of modernization” (market segmentation, organizational platformization, business unit, service 4.0 ecosystem and industry 4.0 ecosystem), accelerated the differentiated innovation of products, accelerated the global layout, and accelerated the corporatization of business units, especially the Star Monkey strategy and supply-side reforms, transformation and upgrading, which achieved good results. The price of Tianjiao was strong last year. The prices of passenger car tires and truck and bus tires all increased to varying degrees in the fourth quarter, so the company's cost pressure eased somewhat. Based on the median forecast of the company's performance, the company's net profit for the fourth quarter of last year increased 4.6% year on year. Bidding for Kumho Tire to help Double Star's global layout: The company's industrial merger and acquisition fund plans to bid for 42.01% of Korea Kumho Tire Co., Ltd.'s shares, and was selected as a priority negotiation target by the other party. Kumho Tire has a history of 57 years and is the second-ranked tire company in Korea. It has 5 major R&D centers in Korea, China, the United States, and Europe, and has 8 factories in South Korea, China, the United States, and Vietnam, and a global sales network. Kumho Tire's sales revenue in 2015 was about 3.24 billion US dollars, ranking 13th in the world, and its revenue scale is several times that of Double Star. Kumho Tire has experienced losses since 2015 due to factors such as debt restructuring and insufficient operating rates due to declining sales in the Chinese market. Its creditors plan to sell 42.01% of its shares. Kumho Tire's main advantage lies in light truck tires and passenger car tires, while Double Star's main advantage lies in truck and bus tires. If this bid succeeds, the two sides will form the best synergy with minimal conflicts of interest and help Double Star's global layout. The majority of controlling shareholders' participation increased, demonstrating confidence in the company's development: In August of last year, the company issued the “Plan for the Non-public Issuance of A Shares”, which plans to issue non-public shares to no more than 10 specific investors, including the controlling shareholder Double Star Group. Among them, the subscription ratio of Double Star Group is not less than 23.38%. The total capital raised this time is no more than 900 million yuan, all of which are invested in the Double Star Environmental Protection Relocation, Transformation and Upgrading Green Tire Industry 4.0 Demonstration Base High Performance Passenger Vehicle Radial Tire Project and the Double Star Environmental Protection Relocation, Transformation and Upgrading Green Tire Intelligent Demonstration Base Automated Manufacturing Equipment Project. The majority of controlling shareholders' participation increased, demonstrating confidence in the company's development; raising capital to introduce high-end intelligent tire manufacturing equipment will improve the company's tire manufacturing level and enhance product competitiveness. At present, the company has submitted the “Feedback Response” on this fixed increase plan to the Securities Regulatory Commission. Risk warning: The bid for Kumho Tire failed; the post-market progress fell short of expectations; the risk of a downturn in the all-steel tire industry; the risk of a fixed increase in delays.